LHC tells FBR to form experts’ panel for better tax laws

LAHORE: The Lahore High Court (LHC) has directed the Federal Board of Revenue (FBR) to form a panel of experts to review future tax legislation, ensuring it aligns with established legal and constitutional principles.

According to Business Recorder, this step aims to prevent future laws from being overturned, which adds unnecessary strain on courts and hampers revenue collection. The court suggested the FBR also hire skilled draftsmen to draft laws that are easily understood by the general public.

The case stemmed from a petition filed by Defence Housing Authority (DHA), a prominent statutory body involved in real estate development.

DHA challenged the retrospective application of tax provisions introduced through the Finance Act 2024. Specifically, the new rules increased withholding tax rates for late filers of income tax returns, impacting transactions made under sections 236C and 236K of the Income Tax Ordinance.

The LHC ruled that these provisions, detailed in section 100BA and Rule 1-A of the Tenth Schedule, could not be applied to taxpayers who had filed late returns before the 2024 tax year. The court emphasized that retrospective taxation, which affects past transactions, is not legally permissible unless explicitly stated by the legislature.

In its final order, the LHC clarified that the amendments are prospective, meaning they only apply moving forward and have no bearing on past filings.

As a result, taxpayers who filed late returns before the Finance Act 2024 are not subject to the higher tax rates mentioned in the new schedule. The petition was allowed, and the court ruled in favour of DHA.

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